Saturday, August 19, 2000

Mortgage rates continue to drop

Tristate average higher than U.S.

By Mike Boyer
The Cincinnati Enquirer

        Cincinnati-area mortgage rates crept lower for the fourth consecutive week, but not as low as the national average which slipped under 8 percent for the first time since Christmas this week.

        The average for a 30-year fixed-rate mortgage was 8.18 percent this week — the lowest since Jan. 1 when it hit 8.17 percent, according to the weekly survey by the Cincinnati Area Board of Realtors.

        For example, the monthly payment on a $100,000 30-year mortgage at the 8.18 rate is $746.28 versus $783.13 on the same loan at the 8.7 percent rate in May — a difference of $36.85 in the monthly payment.

        Joe Treinen, vice president of mortgage lending at Fifth Third Bank, said Cincinnati mortgage rates traditionally tend to be slightly higher than national averages because the demand for housing tends to be stronger.

        Nationally, the average for a 30-year fixed rate loan dipped to 7.96 percent, down from 8.04 percent the prior week, according to mortgage giant Freddie Mac.

        Local and national mortgage lenders said the declining rates, mirroring investors' optimism that inflation will stay low, is a good sign for home buyers but unlikely to spur a big spurt in home sales.

        “Typically we see more activity when rates start to move back up than when they're declining,” said Mr. Treinen.

        When rates are rising, buyers tend to act to head off higher rates while they tend to wait for lower rates when the trend is the other way, he said.

        But Eugene Snaveley, executive vice president of the Board of Realtors, said the lower rates are spurring more home buyer interest, although sales this year aren't likely to match last year's record pace.

        Diane Hoadley, second vice president at PNC Mortgage, one of Greater Cincinnati's largest home lenders, said her bank's analysts don't expect much significant change in mortgage rates until next year. Likewise, Mr. Treinen said Fifth Third's expectation is that mortgage rates will fluctuate around 8 percent for the rest of the year.

        Ms. Hoadley said the drop in mortgage rates enables those already in the market to move up to higher priced homes.

        She said the decline in rates hasn't spurred much refinancing activity except among those with adjustable rates coming due who want to lock in fixed rates.

        She said rates would have to fall under 7.5 percent to spur a boom in mortgage refinancing activity.


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